tv Closing Bell CNBC April 1, 2013 3:00pm-4:00pm EDT
>> i say the angels will win the world series if they score at least ten runs a game because opponents are going to score nine with their pitching. >> i'll take the red sox over the angels over and under in wins for pizza if you want. done. thank you all for watching "street signs." closing bell is next. i'll see you tomorrow. hi, hi, everybody. happy monday to you. welcome to can "closing bell." i'm maria bartiromo at the new york stock exchange. we kick off the beginning of a n new quarter. >> anything can happen on a day like today. it is april fool's day. i've already been had. i've already been had. as we all know, revenge is best when served cold. we'll wait. any gain for the dow or s&p would be a record for both.
right now both are lower. dow off the lows and the highs. down 24 points at this hour. s&p down eight points. >> we've got a gathering storm of what has been a premiere hedge fund on all street. an arrest and steve cohen's sac capital. we'll have the latest developments. we'll talk to someone who used to work there. special exclusive. former cia director, former defense secretary. leon panetta is with us. so much to talk about with nuclear threats from north korea. plus he has some big concerns about cyber security that he wants to talk about. you're going to ask him about the killing of osama bin laden. so you don't want to miss all of that coming up next hour here. >> let's take a look at where we stand as we approach this final stretch on easter monday. dow jones industrial average down 24 points on the session. 25 points lower. 14,553. coming back from the record high last year. nasdaq composite also in the red with a decline in the session of 29 points.
nasdaq really the weakest of all the major averages down almost 1% on the nasdaq at 3238. s&p 500 down about half a percent, 1561. >> let's talk about it in today's closing bell exchange. michael yoshakami, cnbc contributor from destination wealth management. barry knapp. steve sachs from pro shares advisers and our own rick santelli. michael, can we do as well as in the second quarter as we did in the first quarter? >> i don't think so. i think we've done incredibly well, probably more advances than we probably should have had given the fact the top line is still fairly weak. i'm of the believe markets don't go down from here at the end of the year, but i think they're going to go up slightly from here. we cannot in my view, unless we get into a rash of exuberance, and you never know when that happens. >> you spell that f-e-d, right? >> obviously. that's good. i don't think we're going to go up as much. >> what drives things? do you think the economic
backdrop slows down? why won't with do as well? fundamentals remain the same, right? federal reserve keeps printing money. >> that's not the fundamentals, maria. that's the federal reserve. fundament ams are jals are jobs gdp. >> earnings. >> oh, yeah, earnings. that actually is going to matter. you can squeeze as much blood as you possibly can out of the proverbial turnip. at this point you have to have top line revenues. it's a three step forward, two step back recovery. i don't think that justifies another 10% move in the market up in the next nine months. >> barry knapp, we've already hit your target for the s&p for the year. and we did it in the first quarter. now what? >> that is a pretty good question, actually. i agree with your other guest's comment about second quarter being more difficult. our perspective on this is, the stock market at times is a good indicator of future growth. there's -- excuse me. there's a reason why it's in the leading indicators.
if the rally had been driven by growth oriented sectors, sickc c cyclical sectors, we'd have to question our forecast. the three best were health care, staples and utilities. these for us are in the sweet spot of fed policy. large scale asset purchases. these are the stocks with bondlike characteristics. that's what performed best. that tells us this really has been about fed policy. the fed doesn't create real economic growth. they can create inflation or mitigate the risk of deflation. they can help in the bottom of a recession. at this stage in the cycle, we really do need organic growth to get going. i would agree or echo the comments that i'm concerned about earnings season. that's a real close hurdle, obviously. >> steve sachs, what about you? what are you seeing in terms of flow in the etf world? first quarter a lot about dividend movers. a lot about japan. what's going to be the etf drivers in the second quarter? >> yeah, maria, we definitely saw a lot of the same themes
play out in the first quarter we saw in the third and fourth quarter last year. obviously japan has still been a theme. broadly international has still been a theme as well as emerging markets. domestically, small cap versus large cap. mid cap versus large cap. that's certainly played out in the first quarter from a flow perspective. obviously also, you know, from a performance perspective. as well as the sectors we were just talking about. again, flows were chasing performance throughout the first quarter. you know, back to barry's point that he made, though, personally from a flow perspective and performance perspective, you know, we see the fact that the defensive nature of the first quarter rally actually leads us to believe that there's still some fuel for the fire for the back half of the year in the equities. particularly the domestic equities. >> mr. market, rick santelli, what are you expecting to happen this second quarter? i know you like to read the tea leaves. but they've been so distorted by fed policy. what do we make of what's going to happen this second quarter, do you think? >> well, let's start off with saying that if we stay about where we're at in 10-year note
yields, it could be the lowest yield close since the 23rd of january. so a little over two months. while everything going on with equities. i think it's going to be about tinkering for the second quarter. china's tinkering a bit with housing. their stock market is tinkering with constant new lows. i think tinkering in terms of some of the obama care issues that we're going to start to move into. i think when you look at some of the rules and regulations, even shows like "pawn stars" are complaining that they're overregulated. i think all of this is going to make for a second quarter that isn't as easy for stocks. but i still don't see that stocks are going to have any major reversals. and i think treasuries are going to stay on the straight and narrow in a range between 1.80% and 2%. >> maria was nodding her head on "pawn stars." that's her favorite show. >> mine, too. >> it's not my favorite show. i've never seen the show. >> you know what? someone mentioned earlier
emerging market. you've never seen the show. someone mentioned emerging markets. >> trust me. she's never seen the show. >> i got it. emerging markets you have to be very, very careful with right now. what you're starting to see is even though you have high growth rates, in china they have run away real estate inflation. i'm concerned real estate inflation is going to overcome the manufacturing numbers that just came out. i think you buy emerging markets a little bit more limited than before. you buy global emerging markets like mcdonald's and starbucks. you go to shanghai starbucks, you have wi-fi. >> what happened with the dividend payers and that outperformance everybody's been looking for? even the emerging market's dividend payers. it really was not the star of the first quarter necessarily. >> beta was the star. any time you have the market rally, perhaps past fundamentals, beta is going to really be the name. you buy dividends not for theup side performance. you buy it for the downside performance. >> we were going to do a second
round. i apologize. but we've got to go to some breaking news. we got to cut it off at this point. thank you all for joining us. see you later. >> jane welsh has got that breaking news right now. >> reporter: hi, maria. federal bankruptcy josh ruled the city of stockton can go forward and file pr bankruptcy, chapter 9. a huge win for cal pers. a loss for the bondholders and those that it insured, payments of the pension plan. these bondholders had challenged stockton's chapter 9 filing saying basically the city needed to also cut payments to calpers. it was really a question of whether federal bankruptcy law would trump state law. state law says the pension obligations are not creditors and separate. so the federal judge is saying basically it is agreeing with state law. stockton can go forward with chapter 9. will make full pension obligation payments to calpers. it will be the bondholders who get all the cuts. the judge saying that the bondholders failed to negotiate in good faith before stockton went into bankruptcy.
just finally, stockton is the largest city so far to file for chapter 9 in this collapse. back to you. >> as you've long been reporting, known as the foreclosure capital of the country during the big downturn. >> thank you, jane. what does history say happens in the second quarter after the kind of first three months we saw this year? josh lipton breaks it down for us. >> bill, in the first quarter the dow and the s&p 500 were up some 11% and 10% respectively. what does that mean for the second quarter and the rest of the year? if history is any guide, it could be good news for the bulls. let's break down the dow first. according to moriano, our quant analyst, there have been -- we continued to build on those gains in the second quarter. in 12 of those 12 times, or 100% of the time, the dow finished higher for the year. by the way, the month of april, the best month for the dow since
1950. posting an average monthly gain of about 2%. as for the s&p 500, the analysts at barini crunched the data highlighting the other 12 times going back to 1929 when the s&p was up at least 10% in the first quarter. what happened next? for the full year the gauge was up some 16% on average. 92% of the time, after accounting for the gain in the first quarter, the market is still up 1.4% on average from the end of the first quarter to the end of the year. bill? back to you. here we go. good to have you back. >> thank you so much. >> missed you. >> now i'm on edge. >> i don't know what she had last week. i'll have what she had. >> we're awaiting this april fool's joke. >> relax. plenty of time. 50 minutes to go. any positive close for the dow or s&p would be another new all time high. right now the industrial average down 21 points. s&p down a like amount. >> got to call this a victory on the heels of all those records
broken last quarter. coming up, a steady stream of market experts here to help you make the second quarter a profitable one. investment ideas you don't want to miss. that's coming up. meantime, trouble brewing for apple in china. it's caused ceo tim cook to issue an apology in chinese. stock is down again today. we'll come back and find out what the controversy is about and what the long-term damage could be. then could north korea's nuclear threats be the kind of unforeseen wild card that derails the markets and the economy? we'll find out exactly how bad things could get with a rare and exclusive interview coming up with former defense secretary leon panetta. that's later on in the program. stay with us for that.
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upside surprise. biotech gets a bid. and cisco putting more of its cash to use and upping its quarterly dividend payout. here's what's weighing on the nasdaq. apple. shares down today now after receiving negative press in china. apple ceo tim cook responding with an apology to chinese customers for its warranty policies. keep in mind, china is apple's second largest market after the u.s. even a william blair analyst telling me that apple cannot afford any issues with china given china's rise and, of course, its importance in the smartphone industry. >> seema, thank you. >> another apology from tim cook. again. >> it's really interesting. >> the kind of strategy that you never would have heard from steve jobs. >> no. >> in that regard. right? >> different mentality. >> very much so. a humbler apple if that's possible here. heading toward the close. about 45 minutes left on the trading session. if you're just joining us, again, any positive close will
be a new all-time high for the dow or s&p. doesn't look like we're going to get that today. down 34 points on the industrial average with the s&p down nine. how hot has netflix been this year? >> nobody was hotter. >> rival coinstar, the most heavily shorted stock this year despite a 12% rally in 2013. which stock is the better one to own? the trade coming up next. also, the digital currency known as bitcoins has now surpassed the value of 20 national currencies, incredibly. that's no april fool's joke, by the way. that's not what's coming your way. what are bitcoins? put it this way. if you don't know, that's all the more reason to tune in. because some say it is the future. either way you should hear about this coming up on the "closing bell." stay with us. with hertz gold plus rewards, you skip the counters, the lines, and the paperwork. zap. it's our fastest and easiest way to get you into your car. it's just another way you'll be traveling at the speed of hertz.
welcome back. it is wall street's hollywood showdown while investors streamlined into netflix last quarter, making it the best performing stock within the s&p 500. coinstar is the most heavily bet against stock on wall street, investors betting the stock will go lower. will coinstar haters be right or get burned? let's look at netflix andtalk i. carter worth.
on the fundament ams, mark lichtenfield. carter, let's talk charts. you're bearish on netflix but don't love coinstar either. >> at this point sometimes -- it's been a great winner. i think you call it a day with netflix. take your money and run. but coinstar which is, of course, more interesting here in a way, it's basically -- it's kind of dead money from what i can see. it's been grinding in this range between 40 and 65, 40 and 70, for three years. it's always heavily shorted. it's always cheap. yet it's sort of a big so what. there it sits. i think one can do better as a short seller. one can do better as a long only. seems like nothing does here. >> mark, what do you think? >> i agree with him on netflix. netflix is trading at 134 times projected 2013 earnings. that's a tad expensive for me. seven times growth plus increased competition from
amazon and now coinstar. so i would avoid netflix. but coinstar i disagree. i think coinstar is really interesting from a risk/reward perspective. it's trading at just 11 times forward earnings compared to the s&p 500 which is at 14.5 times. trading below one times growth and four times cash flow, so it's cheap. what i really like about the story is that wall street hates it. you've got a lot of sell and hold ratings on the stock. plus as you mentioned, it's very heavily shorted. 45% of the float is sold short. 45%. that's astronomically high. what that does is that puts a lot of buying pressure on the stock, puts a floor underneath it. and if the stock can pop on good news or even news that's not as bad as expected, that could be a face ripper for the shorts. it could be the mother of all short squeezes. >> that's the classic thing. it is cheap. and yet someone, a lot of them, in fact, thinks there's something wrong. 50% of the float being short. it's very dangerous to be short a stock like this. frankly, it's -- it's sort of a
waste of time, we think, to be long. why not just call it one of those stocks you just leave it alone. let someone else fight that fight. >> it's not just about the fact that it's a short squeeze potential. it is a very cheap stock. i think your risk is significantly low. like i said, the risk/reward perspective is very attractive here. plus the company is focused on growth. they've got some new initiatives. they've got a new partnership with paypal. that is off to a good start. where you can deposit or withdraw your funds to a paypal account from a coinstar kiosk. they've got a new red box instant which is kind of like the old netflix where you can combine both streaming and dvds. from a risk/reward perspective i think it's very attractive at that low valuation. >> seems like -- i don't know. go ahead. >> carter? >> it's like they talk about bringing back pay phones in new york city. i mean, i don't know. this is -- leave it alone. >> how's the business going, mark? you're looking at fundamentals. how's business today? >> well, that's the thing. they warned it for the first
quarter when they had their first earnings report. in my opinion the bad news is already priced in. that's why i think there's a real possibility of a short squeeze. because wall street just hates this stock so much already that anything other than a cataclysmic disastrous quarter could end up moving the stock higher. >> well, i mean, that's why they call them value traps. i don't know. everyone can do what they want. i mean, i would just say why bother. look elsewhere. >> mark, you can see, how big of a move might you expect? >> well, i mean, if it just trades -- if it just trades in line with the s&p 500, you're looking at another 15 points right there. so i think it easily could trade up to 70. also management has said that they're planning on buying back 100 million shares. $100 million worth of shares in 2013 at a minimum. that's more buying pressure on the stock that investors can enjoy. >> all right. we'll leave it there. gentlemen, thanks very much. as always, that's what makes a market. see you soon. >> there's one. mark is expecting a short
squeeze, not just any short squeeze, a face ripper of a short squeeze. there's a "walking dead" fan if i've ever heard one. heading near the lows of the session now for the s&p and nasdaq. the dow was down 47 at the close. we're getting close to that as well. but you know what we're getting at least today, getting back to a trend that we saw earlier in the year where we were down each monday, consecutive mondays. we would begin the week on a down note. then it would pick up as the week progressed. >> we'll see. today is a unique story. it's easter monday. european markets closed. volume probably going to be on the light side. a big story is s.a.c. capital. take a look at the broader implications for the hedge fund industry and the market. could math ematter to you even you're not looking at any money in that hedge fund. also ahead -- >> what else have you done for us besides bin laden? >> nothing.
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more more trouble for hedge fund giant s.a.c. it's all happening just a little more than a month away from an important redemption deadline for that fund. kate kelly has the latest on this still developing story. kate? >> bill, a veteran trader of s.a.c. capital was indicted friday on five counts of securities fraud and another charge related to alleged insider trading. michael steinberg had been with the hedge fund for nearly two decades and hails from the same long island town as s.a.c.'s founder, steve cohen. the likelihood of steinberg's charges had been widely telegraphed in the last few
weeks. steinberg reportedly stayed in a manhattan hotel some nights to avoid being arrested in front of his children. whether it was expected or not, his indictment comes as a blow to s.a.c., the $15 billion hedge fund known for rapid trading of hundreds of stocks at a time. s.a.c. over the years has been among the best of its breed, outperforming the average hedge fund and s&p for the last four years out of five, at times by a considerable margin. for that reason many investors have stayed loyal amid the prosecutorial scrutiny. now all that may be changing. in february s.a.c.'s external investors pulled $1.7 billion in a series of what is known as redemptions. demands for the return of their capital. some did so reluctantly fearing they wouldn't be able to find another hedge fund with equally good performance. the fear of a steve cohen indictment or another franchise threatening event was enough that many redeemed anyway. and we may see more of that yet, bill and maria, on the upcoming may 15th deadline which is the deadline for the second quarter redemptions. >> what a story. >> how much money in the fund is
steve cohen's? he's got an awful lot of money in the fund himself, doesn't he? >> the rough math is that about $9 billion out of that 15 belongs largely to steve but also to some other insiders. of course, with the 1.7 going out, that'll go down a tick. at the same time, they're already well into the black for this year to date. all in all, that plus a little bit of money coming in, additional money from insiders, they're going to stay roughly even, i'm told. >> kate, stick around. because we want to bring in ron sana, cnbc contributor. ron brieflyefly worked for s.a. five months in 2008. is that right, ron? >> 2009, yeah. >> you know steve cohen well. >> mm-hmm. >> also joining us wealth editor robert frank. ron, what can you -- what do you think is going through steve's mind right now? he's had so many lieutenants and other traders who have either been indicted or openly investigated. at this point they've not been able to point a finger at him directly. >> yeah. first of all, i haven't spoken to steve probably for about a year. safe to say i wouldn't know what he's thinking right now.
based on what i could imagine he's thinking is that this has been a very long, drawn out process. i think they've often felt at times that they've come after s.a.c. for quite a number of years without finding any smoking guns. that obviously has changed in the last year. but when i joined the firm which was literally the week before lehman brothers collapsed, part of the process in your discussions were the increased compliance, that there was a real effort under way to make sure compliance was first and foremost at the firm. they brought in folks like harvey pitt to engage in compliance seminars. listen, i mean, this is an embattled firm at this point. and it's -- would be a different conversation today, i imagine, than i might have had with steve in the past. given some of his recent actions, it doesn't seem that he's overwhelmingly worried that he's the next one to face charges. >> they've been circling the wagons for so long, kate kelly. you just wonder if, in fact, there's just this mentality that they just want to get him on
something and it's just not there. >> not enough evidence there. >> it's all been circumstantial to this point. >> regardless, you're still looking at an impact on the firm's credibility, on the firm's name. with those negatives out there, why wouldn't investors pull money out of s.a.c.? just because of the appearance of anything? >> well, i think you're seeing that the argument you just made, maria, cuts both ways. on the one hand the prosecutors have been circling for a number of years, maybe five years, maybe even a little bit more. and they haven't found enough to charge steve cohen yet. nor have they found someone willing to essentially flip and cooperate with them to build a case against him. so on the one hand, with that much prosecutorial fire coming at steve cohen, is it inevitable that he's indicted at some point? or, on the other hand, does the mere existence of this for so long and the fact that they haven't been able to do it yet indicate that there aren't enough goods there? i don't know. >> most of the trades we're talking about go back to 2008, don't they? isn't there a statute of limitations coming up? >> coming up on it, yep. >> the trick, bill, there are a number of different trades that are under investigation. essentially the statute of
limitations on a set of trades that have implicated steve cohen do have a statute that runs out in july of 2008. that's a significant date. i think a lot of investors are looking to the second quarter or really the third as the time at which they'll make a longer term decision. to answer maria's earlier question, i think people have stayed loyal because they have not found the sort of outperformance in the hedge fund world, particularly in the last two or three years. returns have been very tepid. this is an industry under siege. s.a.c. still gets by charging 3% and 50% of any upside. >> that's pretty extraordinarily, ron. even in the hedge fund world. >> yeah. there are other terms that charge 4 and 44 that are in the big quant houses. they're not the most expensive shop on the street. they're certainly in the top five. >> i guess what i want to know is what the impact of all of this is. if we see a disruption, a real disruption at s.a.c., does that impact the whole market? also, does -- i mean, he's been on a buying spree, right,
robert? he's buying a home. painting. is that going to impact something bigger than just his world? >> i think it speaks to the point that you made and the important point that ron made which is one of confidence. steve cohen is at least projecting an air of confidence right now, buying that $155 million painting. buying that $60 million beach house. it's really to show his employees and perhaps even the regulators that, you know, he feels comfortable. he's done nothing wrong. he can continue buying and spending like he normally does. so i think that's -- maybe these are opportunistic. maybe these were things he wanted anyway. this sends an important signal to the markets and to people who work for him. >> robert, don't forget, too, he stepped up recently and donated $17 million to nyu as part of a research effort to help veterans with post-traumatic stress disorder. so you see him, he's essentially a pretty shy, retiring guy, is he not, ron? yet he's getting out there a little bit. >> people have painted him that way for quite a long time, kate. i don't know. i've known him both socially and professionally over the course of the last, i'd say, 16 years.
if you know him, he's not that shy. he has been out and about in the art world. he has been -- he doesn't, like, hide from public restaurants, current environment notwithstanding. i wouldn't say, you know, you can walk up and just say, hey, listen, mr. cohen, i'd love to talk to you about the market. >> he's certainly not known for being shy on the trading floor, right? >> no. >> if you do something he disagrees with, he will absolutely dress you down. on the public circuit he's not a glad hander, necessarily. >> the five months that i worked there, i only saw one, i would say, event that you described. it was the midst of a multibillion dollar market event. it happens. so does every other hedge fund manager. >> is there going to be an impact to the market? if, in fact, we were to see something more serious happen? already this is obviously very serious. but is there going to be an impact to the market do you think? >> maria, if they were a much more levered firm i would say yes. on average as i recall s.a.c. runs at about four times levered on 13, 14, 15 billion. that's assuming that they haven't prepared for redemptions
if there are going to be more. that's assuming that they're levered to the hilt which they're probably not. that they would have to unwind positions that would have a market impact. >> i think that's a good point. i think the other thing is, you are talking about $15 billion of very tradeable capital. folks that trade a lot of stock names both on the short and long side. if they were to go away, which is a far cry from where they are today. you're talking about more than 1,000 employees. one of the biggest hedge funds in the industry. a lot of capital at work that could o stens bli be taken out of the market. the other thing we may want to watch is top holdings. they change all the time. based on most recent filings, look at a name like news corp., sherwin-williams. aig. we may see selling pressure. >> he makes lightning quick decisions in trading. that could change on a dime. >>. 20 minutes before the closing bell sounds on wall street. we've got a market that's not so
far away from the lows, down about 40 points on the dow jones industrial average. coming up, s&p capital iq's rich peterson explains why if history is any guide we could be in for a rough ride the second quarter. >> yet april is supposed to be one of the best markets for the market. >> the best. is there a winner emerging in the battle over dell? could michael dell will the loser in the end? david faber with the latest details there. stay with us. revolutionizing an industry can be a tough act to follow,
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welcome welcome back. the battle over pc maker tell's future heats pup david faber with the latest on this developing story. over this weekend we did get a 274-page merger proxy from dell. delineating all the ups and downs that took place before it made its decision, that is the special committee of dell. we report on many of the details that were in that proxy a few weeks back. it does go through the story of a special committee struggling really in many ways to understand the real earnings power of a business that frankly is in virtual free fall or at least seemed to be, bringing in a consultant, bcg, to give them a sense as to where things really were. starting at a $5.6 billion operating income projection from
management in july for fiscal year '14 that's now closer to $3 billion. that process we have seen firsthand in reading this proxy. we've also seen a special committee that did manage through it all to get six bumps out of silver lake to move it up $4 billion in value for its bid while th bususiness was, again, in free fall. what we don't have in that proxy is the latest machinations in the ongoing saga which is blackstone's fascinating decision to get involved to potentially make a binding bid to acquire dell. right now all we have is a proposal from blackstone saying it could pay as much as -- more than $14.25 a share for the company. it is an interesting question for blackstone as to what value they see when others certainly after reading this document may have a lot more questions about that value. for example, steve milonovich. >> reading the proxy, it does suggest it requires much more investment than we previously
thought. there's talk of acquisitions that they've done. not hitting the plan for revenue. cross selling not coming across as they expected. its early days for the enterprise business. it does suggest more investment is required to get there. >> that enterprise business is perhaps the wild card. it's been mentioned by southeastern, by others who say, hey, you're selling this thing too cheap as one area where there's a store of value, perhaps, that is not being recognized in the $13.65 deal that is currently out there. >> it's an interesting story that keeps developing. what is blackstone's motivation here? >> you know, maria, i've been asking myself that question. clearly they're not in the business of charity. they see an opportunity one would expect to potentially be able to garner returns that meet their parameters while taking risks that meets their parameters. but it's an interesting question nonetheless to wonder what do they see that silver lake and michael dell don't that would allow them to get to a level they really feel comfortable with? or is it a lot more marquee
value? is there value to that they see just coming after a big deal? it's an interesting point for them. if they don't go ahead with a full proposal, that would have reputational risk. but, you know, it also is a reputational risk to jump or hijack a founder company's deal. maybe they get michael dell to at least be friendly to their deal if not actually come along with them in the end. >> this is getting interesting. >> indeed. >> good stuff. heading toward the close. 17 minutes left here. we are down 32 points on the dow industrials. we're looking for a new all time high for either the dow or s&p. doesn't look like that's going to happen today. >> april has been the best month of the year for dow since 1950. will it happen this year after the great runup so far this year? three top market pros weighing in on that next. also ahead, is the dollar in danger of being replaced by a relatively new currency that doesn't belong to any single
nation? >> bit jcoins are digital coins you can send through the internet. >> the value of bitcoins is skyrocketing. get this. each one is worth about 90 buck. about a month ago, they were worth about $33. but one of our guests coming up says bitcoins are just a bubble waiting to burst. both sides of that story, fascinating story, coming up on "closing bell." ♪ [ female announcer ] you're the boss of your life. in charge of long weekends and longer retirements. ♪ ask your financial professional how lincoln financial can help you take charge of your future. ♪
welcome back. >> markets in danger of closing in the red to kick off the second quarter. right, bob pisani? >> it is. there's a good reason. the ism data is a real problem. it was supposed to be a lot stronger than anticipated. still expanding. the bottom line is the regional pmis have been kind of weak recently. look at major sectors today. risk on moves are on the weak side. defensive stocks have been moving up in the last couple week. today we have 3-1 declining to advancing stocks. that's a major problem. there's a lot of damage being done. there's the sectors here. industrials, materials, tech, consumer discretionary, all on the weak side here. the dollar has been stronger recently. that's undercutting some of the exports. look at china. look at the shanghai composite
now. we're at the lowest level this year. chinese pmi, their manufacturing numbers, were okay. still below expectations. all of the commodity names are down. copper. copper is sitting essentially at an eight-month low. it's been trading right in line with chinese stocks, mainland chinese stocks. this is killing commodity names today. aluminum stocks are down. u.s. steel is down. vale and the iron ore group down. sterlite. semis also weak as well. the s&p 500 has not finished lower on the first trading day of a quarter since the fourth quarter of 2011. >> wow. >> one more tidbit for you. >> we're full of them today here. joining us, one kenneth pulkari, cnbc market analyst from o'neill securities. also steven wood from russell investments. and kevin bond. quiet day. that was to be expected.
we've got a few markets closed. >> right. parts of asia were closed. i think what you have to really kind of be thankful for is that the national ism actually reflects the weakness in a lot of the regional numbers we've been seeing -- >> manufacturing report this morning -- >> makes it logical, right? it wouldn't have made sense. >> what about this huge runup we've seen early in the year. you said a moment ago people want to take a breather. >> that's what it feels like today. >> yet this is still a victory down 16 points off of the lows. >> the s&p is actually suffering much more than the dow. that makes perfect sense once again because the dow is representative of the 30 biggest names in the country. very liquid. very easy to get in and out. the s&p has got the broad range of stocks. secondary names more difficult to get in and out of. therefore they suffer a little more. >> steven wood, what are you seeing in terms of the second quarter? would you expect a similar showing as the first quarter or have we seen the gains for the year at this point given the great performance? >> yeah. i think it's unlikely that the first quarter is going to repeat
itself in the second quarter. we're right at our numbers. and i talked to you a couple weeks ago and we were bumping up against our numbers then as well. right about here. some volatility going into the end of the year. there seems to be a mismatch between fundamentals which have not changed a lot and sentiment and momentum which really are. right now there's that competing tug of war between momentum. momentum can be powerful but it's very, very fickle. right now we feel very comfortable that the market could trade up a little bit from here with some volatility. valuations don't look stretched, but they do kind of look fairly valued at this level. >> meantime, kevin, you say forget stocks. you still prefer bonds in this environment. >> i think it's bonds and other alternative asset class. we saw the dow reach all time highs. s&p reach all time high. s&p gained more than 10% in the first quarter alone. first quarter was a great year if we closed the books today. with that said, we saw defensive sectors leading the way throughout the whole first quarter. value stocks leading the way throughout the whole first quarter. we are seeing advances in the market, but they're not coming from those high growth names,
those large cap names that we saw earlier in this bull market. >> what about the international story? for so long the brits were the hottest game in town then not for a couple years. >> quite honestly, i think they're going to continue to struggle. we're seeing kind of weakness all around. look, the u.s., we are actually probably the best positioned for 2013 going forward. at least that seems to be the talk of strategists and analysts. i actually think the second half of 2013 is going to be much better. the truth is i think this next quarter we'll be volatile a little bit. if anybody's looking for a 10% pullback i think they'll be mistaken. >> stephen, would you stay with defensive issues that did so well in the first quarter or would you look for something else that might perk up in the second quarter? >> when you look at the rally, it's been very broad based. just a couple days ago we were bumping up an all time record high for 1,000, 2,000 and 3,000. but it has also had a very defensive characteristic, too. that's that momentum component
as well. investors have gone into equities. but they've done so cautiously with more defensive names. so i think right now relative valuations, emerging markets, for long-term investors. i think investors need that globally diversified multiasset strategy. valuations matter. they need to extend out their time horizon. case by case. security collection is going to be important. >> thank you very much. good to see you. thank you so much. take a short break. we'll come back with the closing countdown for this first day of the second quarter. north korea's saber rattling getti inting bolder by the day. leon panetta explaining whether this is a real threat or more theater. welcome to the new new york state.
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welcome aboard. and his new boss told him two things -- cook what you love, and save your money. joe doesn't know it yet, but he'll work his way up from busser to waiter to chef before opening a restaurant specializing in fish and game from the great northwest. he'll start investing early, he'll find some good people to help guide him, and he'll set money aside from his first day of work to his last, which isn't rocket science. it's just common sense. from td ameritrade. welcome back. we're here on the floor of the new york stock exchange. and we are looking at the close here. down about 16 points on the dow jones industrial average. certainly off of the lows of the session. >> good job. nothing will stop her.
>> down 47 points. >> i was going to walk away. it was tough to do. >> that was your april fool's joke? >> it's best served cold. it's still to come here. here's what we looked like the first three months of this year. okay? now the question becomes, what do we do -- i know. i'm coming back here. what do we do for the next few months? what did we do last year, you ask? let's look at six months of 2012. had a good first quarter. and then not such a good second quarter even though we did come back a little bit there near the end of that quarter there, of course second quarter. we ask our friends peter costa and warren myers. what do you think happens going into the second quarter? do we repeat last year? >> on april 1. you take it, peter. >> i still think the market -- we're going to probably see a very flat line quarter. i do think we'll see a couple of new highs going forward. i think what we're really going to see is a much stronger third quarter. that's what i'm looking for. the second quarter to me is just
going to be almost a wash out. >> you think that because you think earnings reaccelerate in the third quarter? >> i think what happens is that the earnings in the second quarter -- what we're going to see from the first quarter, it's not going to be that strong. you will start seeing ak semirated earnings. i also think there's a lag time between new highs and new new highs. i think that new new high is going to be towards the end of the summer going into august, september. you know, and that's -- i mean, generally every new high you've seen, it's usually taken five months, four or five months for the next new high to build. >> what do you think? >> i think there's been massive undermomentum -- momentum underneath this market upwards. i think that has not abated yet. i think we're still seeing relatively decent economic numbers coming out of the united states. the key number for me this week is going to be the nonfarm payroll. see if we can put two decent numbers together. if we can i think that's going to be a very strong signal that that's the one key that the
fed's really looking at, that jobs number. if it looks like that's starting to improve i think that's going to be a very good sign across the board for all businesses. >> warren, my apologies. look at this market. down ten points on the dow industrials. we had been down 47 points. looking at buyers coming in as we speak. to underline what you're saying. where do you see the conviction right now? >> i don't know if i can pick conviction other than if you look at the dow, it's relatively outperforming the other indices. that leads me to believe people are a little concerned that we may be topping out. they're probably looking more conservative, high dividend, large multinationals. just for a little more protection. but that doesn't necessarily hold day-to-day anymore. >> we were down 47 on the low. it's now down about 10, 11 points. it wants to come back here. this is still a vastly underappreciated rally. you don't have the kind of celebration that we've had in the past except for whatever you're wearing there. >> is it underowned? >> i think it is. this is also probably the least
liked bull market i've ever seen. i've been down on the floor for 32 years. i've never seen a rally or a bull market that's been this disrespected as this one. i still think there is more room on the upside. >> i love it. i love it. >> you could look at it this way. the conferring view is we have no massive bullish sentiment which is a -- >> you haven't seen the retail investor in with both feet as well. i'm going to get ready for the 4:00. we've got leon panetta coming up. guys, see you tomorrow. thanks, everybody. >> david stockland over the weekend "new york times" in the made his case he's made here before on our program that the fed is just way too easy, too much debt, and this is all going to come tumbling down on us. >> it may. i don't really buy that. i look at it the opposite way. it's easy money. easy money here. easy money across the board right now. it's forcing people to get into the riskier assets which are equities. u.s. is leading every other country. this is the place to have your